European Union finance ministers swore to raise minimum bank deposit guarantees to 50,000 Euros (£38,000) today as they battled to form a united front to deal with the global economic crisis.

But the crisis talks in Luxembourg today threatened to descend into shambles while countries propped up their own tottering banking systems and ministers were unable to agree to a French proposal to hike the current 20,000 Euro minimum to 100,000 Euros.

In a joint statement, EU finance ministers said they "all commit to take all necessary measures to enhance the soundness and stability of our banking systme and to protect the deposits of individual savers."

They said they would stay in daily contact to discuss the crisis and "ensure a comprehensive and coordinated response to the current situation."

Angela Merkel was forced to retreat on her pledge to 100 per cent guarantee German bank deposits

The ministers from all 27 member states hope to shore up money markets huge losses in share markets in France, Germany and the UK.

Confusion swept across the Continent's capitals yesterday after Chancellor Angela Merkel went out on her own to suggest she was ready to offer a cast-iron legally-bound 100 per cent guarantee on German bank deposits.

She was later forced to retreat from the incendiary pledge under pressure from Gordon Brown and French President Nicolas Sarkozy.

But the effect of the move by the Continent's economic powerhouse still triggered a series of copycat ' beggar thy neighbour' responses across a panicked Europe.

Iceland introduced 100 per cent protection for its bank account deposits, sparking confusion about how UK customers would be affected.

Denmark also introduced a blanket guarantee, while Sweden doubled its insurance for savers.

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There was fury in Westminster, where Chancellor Alistair Darling warned of the perils of disunity in the face of the credit crisis.

Officials are petrified that savers could flee for countries with more generous deposit protection schemes.

This could undermine the banking system across the Continent, and exacerbate the credit crunch.

The signs of cross-border acrimony added to the febrile mood in markets, contributing to yesterday's devestating sell-off.

Leaders from the 27 EU states issued a statement claiming they were working together to respond to the turmoil, but this did nothing to restore confidence.

The said: 'We will continue to take the necessary measures to protect the system so that individual depositors in our countries' banks do no suffer any loss of money.'

There was little evidence of unity on the ground, as Mrs Merkel's deposit pledge triggered confusion across the Continent.

'Old Major Carruthers the bank manager thinks transferring savings to German banks is tantamount to treason.'

Her statement late on Sunday that the federal government 'assures' the safety of the bank deposits sparked immediate protests from other capitals.

In a major U-turn, a spokesman for the country's finance ministry said yesterday that her words had been misinterpreted.

He said: 'There will be no legislative notification; it's a political declaration.

'It's a very clear signal that people can have faith in their savings-account, current-account and fixed-term deposits.'

Still, Spain and Austria suggested they might improve their own deposit insurance schemes.

In Spain, Economy Minister Pedro Solbes said his government was prepared to guarantee deposits unilaterally if countries do no act together.

He said: 'If there isn't an EU agreement as soon as possible, we will consider our position and if we have to take a decision we will do so.'

Last week the Irish controversially set the ball rolling with a 100 per cent deposit guarantee - introducing the scheme without consulting allies or the European Commission.

The £315billion pledge triggered outrage in other capitals - not least in Britain, where depositors have been moving their cash into Irish accounts.

Britain has been forced to rush forward a new £50,000 limit on deposit protection - and to pledge it could further increase the safety net.

In his Commons statement yesterday, Mr Darling attacked the Irish and German governments' conduct.

He said: 'It does demonstrate the problems that arise when member states take unilateral action, because it has a knockon effect for other member states. It does emphasise the need for us all to work together.'

At a summit meeting in Paris over the weekend, Germany, Britain, France and Italy failed to reach agreement on a mooted pan-European bank bail-out fund.

And any sense of unity at the summit was quickly dispelled after Mrs Merkel subsequently announced her short-lived deposit protection scheme.

Underlining the fractious backdrop, smaller EU member states expressed anger about being left out of the gathering of the 'big four.'

Spanish officials expressed particular bewilderment over the decision not to invite Prime Minister Jose Luis Rodriguez Zapatero to the gathering.

Falling capital

The price of the average home in London has plunged more than £40,000 since the beginning of the year.

Research from the estate agent Haart shows that since January 1, property values in the capital have fallen by 14 per cent, compared with 11 per cent across the whole of the UK.

At the start of the year, the average price in London was nearly £290,000 but it has now dropped to just below £250,000

By comparison, prices across the whole of the UK have dropped about £20,000 to an average of £161,800, according to the latest figures from the Nationwide building society.

The steep falls have plunged thousands of homeowners into negative equity. The only winners are first-time buyers.

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Finance chiefs raise guarantees to 50,000Euros as Europe descends into 'every country for itself' shambles